TREASURIES-US bonds little changed, as markets brush off Iran turmoil

(Adds new comment, updates yields, updates bullet points, adds background)

* Treasuries volumes subdued, investors eschew large bets

* US rate futures price in 14 bps of cuts this year

* Focus on Kevin Warsh's Senate hearing for top Fed job

By Gertrude Chavez-Dreyfuss

NEW YORK, April 20 (Reuters) - U.S. Treasuries were little changed Monday, as bond investors largely looked past the weekend's turbulence in the Middle East that raised concerns about the fragile ceasefire between the United States and Iran, instead focusing on planned negotiations between the parties. Movements in Treasuries were modest on subdued trading volumes, as investors appeared reluctant to make large directional bets due to the uncertainty surrounding the outlook for the Gulf war that has closed the critical Strait of Hormuz, causing energy prices to surge. Market participants said the muted price action reflected confidence that any escalation in the region will be contained. In afternoon trading, the benchmark 10-year yield, which moves inversely to the price, was slightly up at 4.25%, while U.S. 30-year yields were flat at 4.882%. Investors are looking ahead to peace negotiations between the United States and Iran, as Pakistan attempts to resolve differences ahead of the potential discussions. Iran is considering attending the peace talks, a senior Iranian official told Reuters on Monday, a softening of its earlier position, but no decision had been made.

"The Iranians shifted gears a little bit over the weekend...but they don't have a lot of leverage here. We're in a holding pattern for the most part and everyone is waiting to see how things shake out ultimately," said Gregory Faranello, head of U.S. rates strategy at AmeriVet Securities in New York. "I think we clear this period of time, but it could be a little bumpy."

Vice President JD Vance and the U.S. delegation are expected to lead a second round of negotiations in Pakistan. President Donald Trump has said he would send a U.S. delegation to Pakistan for additional talks before a ceasefire is set to expire in the coming days. On the shorter end of the curve, the two-year yield, which reflects interest-rate expectations, rose 1.6 bps to 3.716% .

Higher oil prices also helped lift Treasury yields with inflation fears ramping up. U.S. crude futures were up nearly 7% on the day at $89.61, still far from the highs hit at the peak of the conflict.

WARSH HEARING IN FOCUS

The bond market will also be focused on Tuesday's hearing on Kevin Warsh's nomination as Federal Reserve Chair before the Senate Banking Committee. The hearing could be contentious, as one key Republican - along with Senate Democrats - has committed to blocking his confirmation until the White House drops a criminal probe of current Fed Chair Jerome Powell.

Investors will be keen to see whether the Middle East conflict and higher oil prices have altered Warsh's stance on the need to cut interest rates.

"We suspect that Warsh will try to stick to openness to cutting policy rates, but largely in response to coming productivity gains, and not because of the war," wrote Thierry Wizman, global FX and rates strategist at Macquarie Group, in a note.

The U.S. rate futures market has priced in 14 bps of easing this year, a bit higher from 9 bps a few days ago. Prior to the Iran war, futures markets had factored in a 55-bps drop in rates, according to LSEG estimates.

The change in rate expectations was reflected in the U.S. yield curve's slight flattening on Monday. The gap between two-year and 10-year yields was at 53.3 bps, compared with 53.8 bps late on Friday.

Short-term yields rose more than longer-term yields, in what's known as a bear flattener, reflecting expectations that the Federal Reserve will be on hold as it grapples with still-high inflation. (Reporting by Gertrude Chavez-Dreyfuss; editing by David Gaffen)